Child Insurance Plan, No Child’s Play!

Congratulations! You have just brought your bundle of joy home for the first time. For you as a parent, the key developmental milestones may extend to teething and your son or daughter’s first day at school. Right now, your main topic of conversation is why Babies Grow the way they do and why 0-3 month-old clothes don’t fit your newborn, but a few years down the line foresee your child trying to fit into all manner of different uniforms. But aside from all the immediate practical parenting some financial planning for your child’s future can save you a lot more sleepless nights.

As parents, we wish the best for our children. This among other facilities and amenities includes providing world-class education so that they can achieve their career goals. This is easier said than done given the challenges and competition in the field of education today.

Apart from the challenges of education, which is for the child to grapple with, parents have their own hurdles to overcome like the steep rising cost of education. As a parent, if you are not adequately geared to meet this particular challenge your child could well miss the bus on a solid degree regardless of his/her skill and aptitude.

The good news is that help is at hand in the form of child insurance plans which are tailor-made to meet the future financial needs of your children. Child insurance plans are systematic sums invested regularly in the plan that help accumulate a corpus that will secure your child’s financial future.

Who needs a child insurance plan?

A wise mother once said, “Your child will keep building castles in the air, you better start buying bricks for that castle today”. Every parent that wishes to see his or her child soar untouchable heights and fulfil his/her dreams should consider a child plan that includes financial protection to its best ability for the future in the present. There may be various expenses which you need to incur for children’s education, marriage etc. Children insurance plans will help you to accumulate the required wealth and the only way we can fulfil the prophecy of truly safeguarding a child’s future is through a child endowment plan just like the Shriram Life Genius Assured Benefit Plan.

Why do you need a child insurance plan?

It is only natural for parents to plan for the positive things that might happen to their child, that they’ll go off to a university and have a beaming professional career, but it is, of course, prudent to plan for less happy eventualities too. The problem is especially when you’re full of optimism after the arrival of your newborn it is uncomfortable to think of the dark otherwise. But it is wise to consider and plan financially for this eventuality. A solid child insurance plan policy will mean one less thing to worry about even in your absence.

Consider this, for the course for 2018 of the Indian Institute of Management-Ahmedabad students’ paid Rs. 19.5 lakhs for two years. This is 400% higher than what a premier B-school charged in 2007. If the fees of the two-year management course continue to rise by an average of 20% every year, it will cost roughly Rs. 95 lakh in 2025.

Even undergraduate courses have not been spared. The tuition fee for engineering courses in the Indian Institute of Technology has been hiked from Rs. 90,000 to Rs. 2 lakh per annum. This is just the tuition fee the total cost is much higher. At an average running inflation rate of 10%, a four-year engineering course that costs Rs. 8 lakh today is likely to set you back by Rs. 17 lakh in another eight year’s time.

Imagine by 2030, the same would cost more than Rs. 30 lakh. If you have not planned well, you could be in for a rude shock, falling short of the required corpus when your child is ready for college.

When should parents plan for a child insurance plan?

An ideal time to buy a child future plan is when the child is still young and not reached teens. This allows enough time to build the corpus you have planned for, with considerably lower premiums. By carefully planning the tenure of the plan very early on, you will easily be able to arrange for finance in the important stages of their life.

Underlying factors such as age, income, expenses, assets, liabilities, risk appetite and financial goals also decide when individuals invest. For example, if you are about 10 years or more away from funding your children’s professional education then you can take a greater exposure to risky asset classes as this allows you to have greater flexibility and opportunity to grow your wealth.

What should you do if it is too late for you to plan now?

If your child is already in his teens, it might be too late for you to plan for his / her graduation and post-graduation. But you need not get disappointed, you may still try to save and invest as much as you can. However, now the choice of asset classes should be conservative. You would also be better-off keeping your savings intact for the future of your children. Not dipping in funds that have been kept aside for the betterment of your children would help.

How to save and plan for your child’s future

When saving for your child’s future, remember that the whole financial plan depends on regular contributions by you.

The most basic benefit offered by every child future plan is minimum premium payment and you will be able to redeem returns that are as significant as 5 times the paid amount. This amount is sufficient enough to cover the fees of higher education, college, or maybe overseas education depending on the money you invest in the plan.

Whether you’re a young adult ready to start saving for retirement, a 50-something ready to think of small-time investments, these pointers may help you build savings, reduce debt, boost income and invest wisely.

1. Pay yourself first 
   Save part of your monthly income as soon as you get it rather setting aside whatever’s left over. One way to do this is to set up automatic transfers from your bank account to a savings account or an investment account. Take a percentage of your paycheck or a random number and have it done automatically. Don’t think about it. Don’t go back to it.
2. Save for emergencies 
   An emergency savings account is the foundation of a sound financial plan. But what exactly constitutes an emergency? A true emergency is something you have no control over and little choices about, such as a major illness or a job loss. An infrequent expense you can anticipate, such as a car repair or travelling isn’t an emergency but rather a separate category of expense that also should be saved for. A general rule of thumb is to save enough to cover three to six months’ worth of expenses before looking into any investments.
3. Spend less, save more 
   Saving often starts with spending less. Whether it’s a pricey hair salon, frequent fine dining experiences or brand-new clothing at retail prices. Most people can find things to trim from their budgets. When you cut back on spending don’t leave the savings in your checking account, where you’ll just spend the money on something else. Instead, make a payment that day on a debt or transfer the money to a savings account where it will be out of reach.
4. Lose a habit, gain some savings 
   “Try to reduce one spending habit that is discretionary and bank the savings or put it toward paying down a debt,” If you buy lunch every afternoon at work, dine out three to four nights a week or indulge in other similar habits, resolve to substitute a stay-at-home and save habit for one or two of those days. Paying off debt can be a great way to free up money that you can redirect to savings or investing. Make a list of your debts and pay off those with the highest interest rates or smallest balances first.
5. Factor in all expenses 
   A child will have both short- and long-term expenses. Know that you will need money to take care of your child for the next 20-25 years. While you plan for the long-term goals, you will also be paying towards short-term needs such as school fees, coaching classes or other activities. For short-term needs, look at investing in products such as debt funds or fixed deposits.
6. Don’t ignore your own goals 
   Your child’s financial needs are only one of the many financial goals you have in your life. Don’t undermine your own financial needs, for instance, many parents don’t plan for their retirement and end up spending all the money on their child. If you fall short of money for your child, don’t dip into your retirement saving funds. Make sure you always have sufficient money for your future needs while you work on your child’s plans.
7. Get creative making more money 
   The one way to earn more money could be getting a part-time job. Working longer hours might seem burdensome, but an extra job with a deadline and a specific short-term savings goal can be a smart strategy. Look at it as ‘I am going to work part-time until I save enough money to buy a new car in two years.’ Then it doesn’t become as onerous as it would if you were thinking, ‘I have to work two jobs for the rest of my life,’” says Frank Boucher, owner of Boucher Financial Planning Services in Reston, Virginia.
8. Baby-step your way to saving 
   If you find saving to be a challenge, start by trying to save just Rs.1000 or 5000 for a specific purchase or expense. When you’ve saved and spent that sum, continue to save that amount or more so you can pay for what you need with cash instead of credit. If you’re unable to save any money for major purchases and long-term investments, you’re living above your means. That calls for major adjustments and revisiting lifestyle choices.
9. Allocate your assets 
   Some investments are relatively tame on the risk-reward scale while others are more volatile. Generally speaking, younger people should invest more aggressively while older people should be more conservative.
10. Stick to a savings/ investment plan 
    A dip can in the market could be a good buying opportunity for steady investors who want to add to their portfolio. Intuitively, you may want to bow out but what you should be doing is continuing your strategy of saving and investing. The goal should be for it to be an ongoing process, not to be stopped or restarted because of what is trending today.
11. Don’t be afraid to ask for help 
    When it comes to investing, some might not be sure where to start. How should you know what investments to pick? How do you know if your portfolio is balanced? Don’t be afraid to seek guidance from a professional. Advisory services aren’t only for the wealthy; if you do your research you can find a low-fee service that’ll give you confidence in the market.
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Salient features that you look for in a child insurance plan

Before we enter the market for a child insurance plan we need to know what the best investment/savings plan for your child’s future should include –

• An ideal insurance plan must provide an adequate lump sum and income in case of the demise of the life assured.
• In addition to the above, waiving all of the future premiums after the death of the life assured allows the policy to continue even after the death ensuring the child’s secure future.
• For your children to maximize the benefits of the plan, a good plan should offer a variety of options to your children to withdraw from this.
• The payout years should be customizable as per the age and need of the child.

It is also important to review the progress of your plan and alongside keep monitoring the cost of higher education on a yearly basis and accordingly adjust your requirement from future investment requirement.

Shriram Life Genius Assured Benefit Plan

One of the Savings options available in the market to plan for your child’s future is the&nbspShriram Life Genius Assured Benefit Plan. This is an endowment plan that can very well double up as a good future Savings plan for your child.

Some key features of the plan are –

• Guaranteed Plan: All benefits are guaranteed provided due premiums are paid on time
• There is an auto-cover available for 1 year even if you are unable to pay the premium for some reason
• Benefits of an Insurance cum Investment Plan
• Get 203% of the sum assured with an increasing payout option
• Fixed 10-year premium paying term
• Monthly premium including taxes, is less than ₹2000
• Begin future planning for your child even before you have a child

The future you see for your child when he/she is 10 may be radically different from the one you see when he/she turns 18; this is inevitable. As our little ankle biters grow older, we learn what their hobbies and passions are. The matter of fact is that these are ever changing so choosing a plan like Shriram Life Genius Assured Benefit Plan will help you shape their futures accordingly. If you are ready to plan for a successful future then the genius plan is the way to go.

Note: Shriram Life Genius Assured Benefit Plan is an endowment plan which can be used to plan for your child’s future education, marriage or future liabilities.